Caterpillar Inc. (NYSE:CAT): Is the company heading for trouble?

Boston, MA, 03/26/2014 (usastockreports)- Caterpillar Inc. (NYSE:CAT) has suddenly been the centre of attention pending a lawsuit filed in 2009 by an ex employee Daniel Schlicksup. The ex employee alleges that he was demoted for highlighting the tax irregularities in the company’s accounts, basis of which the company avoided an estimated $2 billion in federal income tax.

Caterpillar faces a tax evasion probe

Following the allegations that Caterpillar has been defaulting in taxes, a US Senate committee has been set up to look into the company’s offshore tax strategy. As per an ex employee’s claim, Caterpillar has reportedly misled the Federal government by wrongly attributing sales worth $5.6 billion to its unit in Geneva when the sales had actually originated in the US. Reportedly the company used its offshore operations in Switzerland and Bermuda to claim tax reductions wrongly.

The Senate subcommittee will now look into the issue and has asked Caterpillar Inc. (NYSE:CAT) and Pricewaterhouse representatives to participate. PwC had been advisors to Caterpillar during the late 90s and had advised the company during the time it was undergoing reorganization.

Caterpillar in recent times

Caterpillar Inc. (NYSE:CAT) has been facing tough times recently with a dip in its revenues in 2013. The recent slowdown in China has singularly been Caterpillar’s worst nightmare come true with the company mismanaging its inventory leading to overstocking its suppliers.

There is also news that the company already owes the Federal Government a large sum in taxes for the current year.

The company has vehemently denied all allegations of tax evasion. It has assured its shareholders that it has not been involved in any malpractices and that it will contest all allegations. It has also agreed to fully cooperate with the Senate investigation.

Surprisingly the market still seems to be in favor of Caterpillar Inc. (NYSE:CAT). The company shares are trading at $98.59 with a positive trend.